ESMA Sets 2026 Enforcement Priorities for EEA Corporate Reporting

The European Securities and Markets Authority (ESMA), the European financial markets regulator and supervisor, on 13 October 2026 published the 2026 European common enforcement priorities (ECEP) for the annual financial reports of issuers admitted to trading on European Economic Area (EEA) regulated markets. The priorities span IFRS financial statements, sustainability statements prepared under the European Sustainability Reporting Standards (ESRS), and digital reporting in the European Single Electronic Format (ESEF). Alongside the priorities, ESMA published the 31st extract from the FRWG (EECS) database of enforcement, containing seven decisions on the application of IFRS Accounting Standards and ESMA’s Guidelines on Alternative Performance Measures (APM Guidelines).

The public statement applies to 2026 annual financial reports as defined by Article 4 of Directive 2004/109/EC, the Transparency Directive, which includes sustainability statements and ESEF requirements. ESMA, together with national enforcers in the EEA, will pay particular attention to the priority areas when examining the application of the relevant reporting requirements, and enforcers will take enforcement actions whenever material misstatements are identified, with ESMA subsequently reporting on their findings. Enforcers may also set national priorities and will continue to focus on other entity-specific issues. ESMA reaffirmed its commitment to simplification and burden reduction while maintaining a focus on investor protection and market stability, underlined the importance of materiality assessments, and urged issuers, auditors and supervisory bodies to consider the recommendations in light of their materiality and relevance for the issuer’s operations and annual financial report.

IFRS Priorities for 2026 Financial Statements

The first IFRS priority addresses geopolitical risks and uncertainties, which ESMA stated remain highly relevant for the 2026 financial statements of European issuers, citing ongoing geopolitical tensions, trade policies, sanctions, changes in trade flows and regional conflicts with potential direct and indirect implications for operations, financing conditions, asset valuations and cash flow projections. On liquidity risk, the statement calls for a complete and clear maturity analysis for financial liabilities, including lease liabilities and trade payables, based on undiscounted contractual cash flows, with narrower maturity intervals where significant repayments are concentrated in a particular period. Issuers referring to future financing actions should distinguish committed financing from financing that remains subject to conditions, negotiations, approvals or other uncertainties, and issuers facing significant liquidity pressures or financial difficulties should provide more granular disclosures on liquidity risk, liquidity management measures and sources of funding.

ESMA expects entity-specific disclosures where cash balances are subject to exchange controls or other legal, regulatory or contractual restrictions, covering the judgement applied and the nature, amount and location of material restricted cash balances. It reminded issuers of the IAS 1 disclosure requirements concerning covenants attached to borrowing arrangements, and noted that covenant waivers obtained after the reporting period but before the financial statements are authorised for issue do not affect the classification of liabilities as current or non-current at the reporting date. On fair value measurement, issuers should maximise the use of relevant observable market inputs and provide transparent, entity-specific disclosures on valuation techniques, key assumptions and estimation uncertainty, including quantitative and sensitivity information for Level 3 measurements. Issuers disposing of assets or exiting markets should assess whether the IFRS 5 criteria for classification as held for sale or as discontinued operations are met, and banks are expected to reassess whether existing models, assumptions and management overlays appropriately capture heightened uncertainty in expected credit loss measurements, with particular attention to sectoral, geographical and counterparty-specific exposures.

The second IFRS priority covers restructuring provisions and debt restructuring. Under IAS 37, the statement notes, a constructive obligation for a restructuring arises only when an entity has developed a detailed formal plan that creates a valid expectation among those affected, and provisions should include only direct expenditures necessarily entailed by the restructuring and not associated with ongoing activities. Termination benefits for employees made redundant are recognised under IAS 19, and issuers should assess whether restructuring programmes affecting defined benefit arrangements give rise to pension curtailments or settlements. On debt restructuring, modifications of financial liabilities should be assessed under IFRS 9 to determine whether derecognition is required; beyond the quantitative “10% test”, ESMA expects issuers to consider qualitative factors, such as a change in the currency of denomination or the introduction of an embedded equity component, and to disclose entity-specific accounting policies, significant judgements and the quantitative effects of modifications.

Sustainability, ESEF and the 31st Enforcement Extract

For sustainability statements, ESMA described financial year 2026 as a transitional year. Article 2(1) of Commission Delegated Regulation (EU) 2026/1563 permits issuers to prepare sustainability statements under ESRS Set 1 as amended by the quick-fix delegated act, under ESRS Set 2, the simplified standards, or under Set 1 with the Set 2 reliefs exhaustively listed in the regulation, and issuers should be transparent about the version used. Because the Climate Delegated Act, the Environmental Delegated Act and the Disclosures Delegated Act under the EU Taxonomy framework are under revision, the 2026 priorities include no specific Taxonomy recommendations, though ESMA confirmed that enforcers will continue to supervise Taxonomy disclosures in financial year 2026 sustainability statements.

The first sustainability priority concerns the materiality assessment. ESMA encouraged issuers to assess positive and negative impacts with the same level of rigour, stating that it has observed more extensive disclosure on positive impacts than on negative impacts, and called for clear disclosure of impact materiality thresholds, comparable granularity across positive and negative impacts, coverage of both the issuer’s own operations and its upstream and downstream value chain, and use of the entity-specific category only after excluding all possibilities of relying on the ESRS categorisation. The second priority addresses connected information on impacts, risks and opportunities (IROs), policies, actions and targets (PATs), and metrics, with enforcers focusing in financial year 2026 on E1 Climate change and S1 Own workforce disclosures due to the advanced maturity of those topics. Issuers that do not have PATs for a material IRO must disclose that fact, should explain how their key actions serve corresponding policy objectives, and should be transparent about current and future significant capital and operating expenditure dedicated to key actions.

ESMA stated that it has in some cases observed a mismatch between the IROs disclosed under SBM-3 and the risks included elsewhere in the annual financial report, as well as omissions of information on the current financial effects of material IROs. It expects consistency with previous reporting periods, clear communication of revised or restated comparative figures, and disclosure where a target has been met, missed or abandoned. It noted that some issuers describe targets as “science-based” or “1.5 degrees” without explicitly stating whether and how the targets meet those characteristics, and reminded issuers to disclose absolute, and not only intensity, target values and to distinguish gross greenhouse gas emission reduction targets from netted targets.

For 2026 ESEF filings containing IFRS consolidated financial statements, ESMA and enforcers will pay particular attention to common filing errors in the statement of changes in equity, covering the correctness, completeness and consistency of markups, structural, presentation and calculation correctness, extension taxonomy elements and anchoring, and the correctness of signs, scales and numerical representation. Errors observed include marking up movements in specific equity components using broad “total equity” members, omitting columns such as non-controlling interests or retained earnings, nested ZIP files within ESEF packages, extensions created for entity-specific reserves where suitable core taxonomy elements already exist, anchoring equity transactions to unrelated profit-or-loss elements, and incorrect signs, such as tagging a distribution to owners in a way that increases equity. ESMA recommended marking up empty fields or dash symbols to preserve their economic meaning in the machine-readable report and pointed issuers to the ESEF Reporting Manual, updated in 2025, for implementation guidance.

Separately from this year’s priorities, the statement’s general reminders note that IFRS 18 Presentation and Disclosure in Financial Statements is effective for annual reporting periods beginning on or after 1 January 2027 and requires comparative information for the preceding period, and that 2026 financial statements should include entity-specific IAS 8 disclosures on the expected impact of IFRS 18. The ESEF Taxonomy package published by ESMA in April 2026, applicable to 2026 annual financial reports, includes separate IAS 1 and IFRS 18 entry points. ESMA also referred issuers to Q&A 1884 on the APM Guidelines for performance measures based on hypothetical income and expenses, observed that many sustainability targets are approaching their deadlines as the year 2030 draws close, and stated that prompt disclosure will be important where previously set 2030 targets cannot be achieved. Issuers should prepare to draw up financial year 2027 reporting based on ESRS Set 2, under which undertakings should not report non-material information except in specific cases.

The 31st extract from the FRWG (EECS) database of enforcement contains decisions taken by national enforcers between October 2024 and January 2026. The FRWG (EECS) comprises 38 enforcers from EEA countries coordinating the supervision of nearly 4,000 issuers admitted to trading on EEA regulated markets that prepare IFRS financial statements, and the report describes it as the largest regional network of enforcers of financial information. Decisions are selected for publication under ESMA’s Guidelines on enforcement of financial information, including where they address complex accounting issues, divergent IFRS application, widespread issues among issuers, or inconsistent enforcer experiences.

Five decisions in the extract concern the application of IFRS Accounting Standards. One enforcer concluded that a fertiliser producer recognised revenue before control of the goods had transferred to customers in bill-and-hold arrangements, contrary to IFRS 15, because the stored goods were not separately identified as belonging to individual customers and significant risks remained with the issuer. Another enforcer rejected a football club’s IFRS 13 fair value measurement of its stadium, citing internally inconsistent cash-flow and discount-rate assumptions, a gearing ratio and Beta that did not reflect market-participant assumptions, and a perpetuity that conflicted with the stadium’s remaining useful life of around 30 years. An oil and gas issuer was required under IAS 1 to disclose that climate-related matters had no material effect on its financial position and financial performance and to explain why. A further enforcer agreed with a power cable producer that no borrowing costs should be capitalised under IAS 23 where the qualifying assets were financed entirely from non-borrowing sources. The fifth decision found that an issuer’s IAS 20 and IAS 12 disclosures were insufficient where recognition of a material deferred tax asset was underpinned by government support whose nature and extent were not disclosed.

The two remaining decisions address the APM Guidelines. In one, an enforcer found that a “Management EBITDA” measure included in an initial public offering prospectus breached the fair review principle by adding projected interest income from long-term customer receivables that were transferred to a financial institution and derecognised under IFRS 9 shortly after initial recognition. In the other, an enforcer found that a property developer’s “Underlying EBITDA” and “Underlying net result” were calculated inconsistently over time, because one-off losses were excluded while one-off gains of the same nature were included across the 2023 to 2025 reporting periods, contrary to the consistency requirements in the guidelines. ESMA stated that it will continue to publish further extracts from the database on a regular basis.